Innovation made in New Europe

It was, I have to say, quite an ordinary awesome California day when our not quite ordinary (but surely awesome) squad of entrepreneurs from the heart of New Europe touched down south of the Silicon Valley in the San Jose International Airport after an exhausting16-hour flight. Only Australians have it worse, as I was told. But hey, we didn’t care about fatigue, as we were there to show what we’re worth! We had conferences to attend, people to meet, pitches to pitch, the world to conquer and only six days to do this. If you can make it there, you’ll make it anywhere, as Frank Sinatra would probably sing about Silicon Valley, were he born 50 years later.

As a group of innovators from CYBERSEC HUB—a platform connecting cybersecurity startups from Central and Eastern Europe to the global market—we set out with two big questions on our minds:

Can we take our homegrown companies and turn them into global business using Silicon Valley?

How can we implement the Silicon-Valley-type of environment (basically bring investment) in CYBERSEC HUB so we can turn our homegrown companies into global business without using Silicon Valley as a middleman?

So, as I said, Silicon Valley was completely unsuspecting of our devious intentions when we landed there on a sunny spring day.

It’s not easy for a bunch of startups from New Europe to fit in with the rather specific Silicon Valley business environment. I guess my fellow CYBERSEC HUBians would agree with me: you can’t take a company from New Europe, plant it in Silicon Valley, and just pray for rain. The two ecosystems with all their idiosyncrasies and histories are very different, globalisation notwithstanding. One problem is that New Europe doesn’t have a brand. It’s not quite like the Mercedes-Benz-precision thing that pops into your mind when a person says they’re from Germany, or the I-don’t-get-what-people-see-in-that-snobby-accent when someone says they’re from the UK. People ask: where is New Europe? Well…

Another issue is a shortage of VC capital. New European markets are not just as mature and saturated with money available for startups as America is. This doesn’t mean that there is no money looking for investments. Large funds from New Europe are either concentrated in more traditional sectors, like real estate, or governed by public or quasi-public entities, usually not especially keen to invest in high-risk enterprises.

So here are the two big tasks for the countries from New Europe. Firstly, we need to make a brand for ourselves. Secondly, we have to create a startup ecosystem providing a deep VC market.

We saw the former already going on in the Valley. There are some great initiatives that aim at exactly this goal. We visited the Polish Hub in San Francisco, organised under the Polish Ministry of Development and run by Maja Kieturakis. Even though the Polish Hub has operated only for a couple of weeks so far, it already goes full speed on bringing in Polish start-ups, sitting them down in RocketSpace at 180 Sansome Street, and pushing them to go global. The Polish Hub has counterparts from many other New European countries, such as the Czech Republic, Hungary, or Estonia. But those are unilateral actions taken by individual countries, which, considered on their own, are all rather small and have a limited budget. My proposition is: why not try and do it together? We still have more to gain through cooperation than to lose through competition. There are platforms that can help at least jumpstart this, e.g. the Visegrad Group (V4). I’ve spoken to many V4 representatives, both in Europe and during the US trip, and I can tell we all face similar challenges. This is clearly worth a try.

One of the greatest structural problem faced not only by New Europe, but also by other innovative but comparably young startup geographies, is the fact that the VC sector is not deep enough. The quality and availability of high-risk investments is decisively shaping the ecosystem, enabling appropriate valuation of products and full multi-round investment process with real exits. How many late-stage VC funds from New Europe do you know? How many American funds investing in startups with their HQ and IP registered in Poland or Hungary can you appoint? None? One or two? But it doesn’t need to be like that. Putting forward just one example from our backyard: last year, Poland instituted a public ‘fund of funds’, investing public money in private VCs for them to invest it back into Polish companies. Other programmes incentivising homegrown capital to move their focus into high-risk enterprises are also emerging in New Europe.

We all know our technology is great—we have the brightest minds and the best coders there are, nobody doubts that. However, New Europe needs to learn how to sell it. There is also the other side of this coin: the Americans need to learn to buy it, because when communication fails, the opportunity is lost for both sides.

Surely the Silicon Valley is one of the most (if not the most) important places when it comes to innovative technologies, but the issues described above can be applied more broadly when it comes to doing international business. One of the solutions is to encourage regional cooperation among New European countries through their diplomatic and trade posts around the world. This is a huge task, which will involve cooperation not only between countries, but between individual companies and think tanks as well. However, the potential benefits are certainly worth the effort.